Australia Pork Industry Overview, August 2004
By USDA Foreign Agricultural Service - This article provides the pork industry data from the USDA FAS Livestock and Products Annual 2004 report for Australia. A link to the full report is also provided. The full report includes all the tabular data which we have omitted from this article.Report Highlights
Beef and pork production are forecast to decline in 2005, while exports are expected to fall and remain unchanged, respectively. Japan is expected to overtake the United States as Australia’s largest export market for beef in 2004, with shipments to Japan reaching record levels in recent months. Beef exports to
Japan are expected to continue rising in the absence of U.S. competition. Recent changed import conditions for pig meat will lead to imported from the United States for the first time.
The Australian pork industry is in the process of recovering from the disastrous conditions
that beset the industry in 2003. Severe drought greatly restricted feed grain production and
forced grain prices to record levels, decreasing producer returns. A stronger Australian dollar
reduced export returns and boosted the competitiveness of imports in the domestic market.
Pig inventories are forecast to rise 11.5 percent in CY 2005. More normal weather conditions
experienced of late are expected to allow producers to boost the size of their herds.
Slaughter, however, is expected to fall, along with pork production. Pork exports are forecast
unchanged in 2005, while imports are expected to rise to record levels. After peaking in
early 2004, a recent weakening of the Australian dollar has provided a near-term boost to
industry competitiveness. New quarantine import conditions are allowing additional
countries, including the United States, to supply some pork products. Industry sources
expect that total pork imports will unlikely rise appreciably, but that the current suppliers will
face greater competition.
Australia’s competitiveness in world agricultural markets and returns to domestic producers
are heavily impacted by the value of the Australian dollar. The Australian dollar has
appreciated markedly against the currencies of major trading partners, particularly the
United States, over the past two years -- averaging US$0.544 in 2002 and peaking at
US$0.80 in early 2004. Currently, the Australian dollar is valued at about US$0.71.
Swine
The Australian pig meat industry has been under considerable pressure since import
competition began in the late 1990’s. Canadian and Danish imports now provide significant
competition for local producers. Together with fluctuating feed-grain supplies and currency
values, the Australian industry has tended to suffer from a “boom-bust” cycle over the last
ten years. The bright spots have been the development of a viable export industry and
relatively healthy growth in domestic consumption.
More recent times have seen a stronger Australian dollar reducing the competitiveness of
exports and increasing the competitiveness of imports. This has placed the domestic market
under considerable pressure, with pork prices in 2003 falling to the lowest level since
1997/98. Despite improved feed grain supplies in 2004, the approval of pig meat imports
from an additional set of countries (including the United States) is likely to maintain pressure
on domestic pork prices for the foreseeable future.
Inventory
Closing inventory is forecast to rise to 2.9 million head in CY 2005. This represents a
significant increase on the revised estimated of 2.6 million head for the previous year. Lower
slaughter levels associated with the anticipated expansion of the pig herd are driving the
expected inventory increase.
Expected closing inventory for CY 2004 has been revised downward to 2.6 million head.
Historically high year-to-date slaughter levels thus far in 2004, following the record high
slaughter level in 2003, is expected to result in the lowest closing inventory figure since
2000. The lower than expected inventory level is attributed to record-high grain prices
towards the end of 2003, brought-on by the extreme drought conditions.
Closing inventory in CY 2003 has been revised downwards to just under 2.7 million head, inline
with official ABS figures and well under Post’s previous estimate of 2.9 million head.
Slaughter
Total pig slaughter is forecast to decline to 5.1 million head in CY 2005, three percent lower
than the previous year. An anticipated increase in the availability of feed grain, and lower
grain prices, is likely to see some stock withheld from slaughter. A higher level of female
stock will likely be withheld from slaughter for breeding purposes in order to provide animals
for the expected rebuilding phase.
Estimated slaughter for CY 2004 has been revised downward to just under 5.3 million head.
Official ABS data for the first quarter of 2004 shows a significant decline in slaughter.
Improved feed grain availability in 2004, following a record grain harvest, has helped to
improve the outlook for the pig industry from the rather dismal conditions in 2003.
Post has revised the CY 2003 slaughter number downward from 5.8 to 5.7 million head, inline
with official ABS statistics. Despite this downward revision, shortages of feed grain
brought-on by the drought pushed slaughter to a record level.
Production
Total pig meat production for CY 2005 is forecast at 390,000 MT, down from the revised
estimate of 403,000 MT for the previous year. This reduction in forecasted production is
directly in-line with the forecast decrease in slaughter, with derived average carcass weight
remaining largely unchanged.
Estimated production for CY 2004 has been revised downwards to 403,000 MT, in-line with
the downward revision in projected slaughter. Post has revised the production number for
2003 downward slightly to 420,000 MT, which is now in-line with official ABS statistics. The record slaughter level in 2003 pushed production to a record level, constrained only by a
drop in carcass weights.
Exports
Total pig meat exports in CY 2005 are forecast at 65,000 MT (CWE), unchanged on the
revised estimate for the previous year. Post uses a conversion factor of 1.25 to convert
shipped weight data to carcass weight equivalent (CWE). The lower expected production in
2005 is expected to greatly reduce the availability of pig meat suitable for export. The bulk
of Australia’s pork exports are fresh product destined for nearby Asian markets.
The projected export of pig meat in CY 2004 has been revised downwards to 65,000 MT,
about 10 percent lower than the previous year. Official ABS statistics for the first quarter of
2004 show a 26-percent drop in exports compared to the same quarter in the previous year.
Industry figures have exports for 2004 year-to-date (Jan-Jun) down 17 percent.
Lower slaughter levels due to improved production conditions have significantly lowered the
availability of pig meat available for export. Post anticipates that exports will improve
somewhat throughout the remainder of 2004 and so has full-year exports falling by only
about 10 percent.
Pig meat exports for CY 2003 have been revised downwards to 72,000 MT, in-line with official
ABS statistics.
ABARE has exports for 2004/05 at record levels. However, improved feed grain availability
and an improved outlook for the Australian pig industry should see stock withheld from
slaughter, making a dramatic increase in exports unlikely. Furthermore, year-to-date
statistics show exports trending downwards thus far in 2004, making record exports in
2004/05 unlikely.
Imports
Total imports for CY 2005 are forecast at a record 80,000 MT, up significantly from the
revised ABS figure of 75,000 MT in 2003. The Australian dollar remaining at historically high
levels (despite easing recently) combined with lower domestic production should see imports
grow in CY 2005.
Pig meat imports for CY 2004 are estimated at 75,000 MT (CWE), up significantly on post’s
previous estimate. The 2004 import projection is in-line with year-to-date industry data.
Until recently, only three countries were approved to ship commercial quantities of pig meat
to Australia – Canada, Denmark and New Zealand. According to official ABS statistics,
Australia imported a total of 52,800 MT of pig meat (shipped weight) in CY 2003, of which
Canada supplied 32,000 MT and Denmark supplied about 20,400 MT, with only minor
quantities imported from New Zealand.
On May 10, 2004, the Australian Government announced new import conditions for pig meat,
including additional countries that can supply pork products. Australian Pork Limited (APL),
the peak body representing the pork industry, actively sought to overturn the decision and,
when unsuccessful in the appeals process, filed a court case challenging the decision. Of
particular concern to APL is Post Weaning Multi-Systemic Wasting Syndrome (PMWS).
Reportedly, APL is seeking that the court review the government’s actions to ensure that the
import protocols developed in the Import Risk Assessment will limit the level of risk for
PMWS to an acceptably low level. APL has also indicated that, in this case, quarantine
conditions were not developed through a science-based process. Reports indicate that a
“Directions Hearing” of APL’s application filed in the Federal Court in Sydney was held on
August 10, 2004. (See GAIN Report #AS4022 for further information on this issue.)
Although the United States is expected to gain a foothold in the Australian market, industry
sources expect that market shares will be adjusted, but that total imports are unlikely to rise
appreciably.
Prices
Australian pig meat prices have been trending upwards for the past decade, according to
ABARE’s historical figures. However, higher production costs in 2003, brought on by a feed
grain shortage and a strengthening in the Australian dollar combined to lower export returns,
while imports were very competitively priced. This set of conditions has created considerable
pressure on the local industry. The industry reacted by opposing the government’s actions to
open the domestic market for additional suppliers, and by attempting to get the government
to provide funds for specific restructuring assistance.
To view the full report, please click here (PDF)
Source: USDA Foreign Agricultural Service - August 2004